Should your business be investing in 'strategic outsourcing' solutions?

At RSM Australia, we are interested in trends, macro and micro economic trends, business trends, technology trends and any broader environment or behaviour patterns that are impacting on our client’s businesses, the means by which they solve their problems, become more profitable, and in turn the demands that they have of us.

One of the key trends amongst RSM's client base in recent years has been the emergence of an appetite for Strategic Outsourcing as a means by which clients are solving non-core business problems.

Non-core business activities are anything that a business owner has to manage, that is not the core service offering for her business. 
For example, if your business makes boats, anything else that you have to do to run that business, that does not involve making and selling the best boats that you can, is a non-core business activity.

Sometimes it’s these non-core business activities, and the cost and management time associated with them, that are impacting the most on a business owners ability to run and grow their business.  In recent years a distinct market trend has emerged around the outsourcing of those non-core business activities for better overall business outcomes.

This article gives some thought to the philosophy of outsourcing and how SMEs are embedding outsourcing in their businesses.

• Why is there a trend towards outsourcing?
• What is the outsourced economy?
• How is outsourcing impacting the accounting world?
• Digital & Systems Reviews
• Key questions about Outsourcing
• Should you outsource your accounting and finance functions of your business?

What does ‘outsourcing’ mean today? 
Is outsourcing a concept that your business should embrace?

Why is there a trend towards outsourcing?

Outsourcing emerged in the 1980’s when businesses started to shed in-house tasks and asset ownership in order to create time and cost savings for themselves.

This basic form of outsourcing continued as an important business tool until recent years in which rapid technology advances have spurned a second wave of outsourcing strategies and solutions.

In 2019, everyone is firmly within the age of the ‘gig’ economy. An environment where people are happy to engage a supplier in a micro role, or on a short-term basis, to solve a problem for them.

This is the purest form of task outsourcing.

The most visible incarnation of this has been the great technology service provider revolutions, two of the biggest, Uber and Airbnb, have leapfrogged entire industries, and have, with others, created a culture of ‘gig’ solutions that is now pervasive.

Psychologically, business owners are increasingly comfortable with the concept of ‘outsourcing’ because it exists in every area of their lives. 
With that comfort we now look critically and objectively at outsourcing as a solution to our business needs.

What is the outsourced economy?

The outsourced economy itself is the product of a technology revolution.

The intersection of smartphones, tablets and personal technology, integration of robotic and AI technology for automation of tasks and self-learning of software, with ubiquitous internet access, and the evolution of the cloud and ability to transfer and store data outside of an immediate physical hard drive. As the cost of all of this technology falls we are living through the age of democratisation of systems and software, and where technology assistance and solutions that would have seemed incredible 5-10 years ago are now available and being used by SMEs.

It is increasingly evident that SME’s who do not embrace technology in their business will inevitably fall behind the competitors who are.

This environment of technology revolution has created the tools for outsourced ‘gig’ solutions to all manner of problems. With the early success of these gig solutions in our day-to-day lives, we now see the broad psychological embracing of outsourcing and business owners in the SME space who understand the role of these solutions in building the most efficient business that they can.

How is the trend towards outsourcing being felt in the accounting world?

Strategic Outsourcing of accounting and business services is another step in this evolution of service provision. It’s about business owners identifying areas where they are spending too much of their time, carrying the excess risk, or tying up resources with internal hires, when external expertise exists that they can switch on and off at a lower cost, freeing them up to run and grow their business.

Not only is the business owner now ‘free’ from the management of those tasks, but she also has better business outcomes from engaging external expertise. Cloud accounting, accounting automation, and efficient bookkeeping processes mean reliable and timely data and equip the business owner to make real-time business decisions, rather than the old model of relying on data that was often many months old.

Other outsourcing solutions serve to de-risk a business owner who is currently trying to manage tasks that may sit outside of their expertise, or which may come with very real financial and reputational risks if you get it wrong.

Payroll services are a good example of this.

Common questions clients ask about outsourcing include:

1. What technology platforms they should be running in their business to make their operations more efficient;
2. How can they improve their data capture, and data analytics and presentation so that they have a better understanding of business performance, and a better ability to improve that performance; and,
3. What areas of their business are prone to risks, and how can they leverage external providers to manage that?

Benefits from outsourcing a non-core business activity to an expert

 Adam Smith was an 18th-century philosopher regarded by many as the father of modern economics. In his seminal book ‘The Wealth of Nations’ Smith speaks of the efficiencies gained when we allocate resources based on demand and our abilities.

At its heart, outsourcing is seen as a similar conundrum, if you are really good at building boats, why spend 50% of your work week trying to do payroll, or preparing BAS statements? Let someone else do that. If you spend 100% of your week building boats while you outsource the rest to someone who’s efficient at what they do, the total financial outcomes for your business should improve.

Digital and Systems Review

Businesses who may not be looking at outsourcing options should still be thinking about what technology exists that they should be implementing internally for better business efficiencies.

Business owners should schedule some time for review of their accounting systems and processes where questions should be asked such as:

• Are there simple and inexpensive technologies available that can be integrated into the business which will automate and reduce some of the manual work being done?
• Do you have inefficient business or accounting processes that can be streamlined?

This Digital and Systems Review is an activity you can do yourself, or something which you can engage an external expert to help you with, but in either scenario most business owners find that the inefficacies they identify the process changes that they implement from a Digital & Systems Review, are hugely valuable and have the effect of reducing business overhead costs and freeing up more time for the business owner to do what they do best.

Should you strategically outsource functions of your business? 

The key questions for any business owner are:

• What is the cost of doing this myself (or to employ someone) and are there providers who have technology, or systems and processes that mean they can do it for a lower cost?
• What are the risks of doing the task myself?
• How much of my own time could I save by outsourcing this task, and if I lift that time restriction and re-direct that time to other areas of my business could I potentially grow my business revenue or profit?

Strategic Outsourcing solutions are certainly not for every business or every circumstance, but in the age of the gig economy and the business technology revolution, it’s important that business owners ask questions of themselves and their businesses to be comfortable that they are operating as efficiently as they can (or at least as efficiently as their competitors), and that they are making best use of the new business management solutions available to them. Business owners need to consider outsourcing business functions such as day-to-day bookkeeping, payroll administration, accounts maintenance, management reporting, taxation and corporate compliance, forecasting and advisory needs, as part of streamlining business systems and processes.

Outsource your accounting and finance function and focus on your business goals instead.

RSM can help you streamline your accounting systems and processes through both traditional accounting and our digital solutions available.

For more information about strategic outsourcing, please contact our strategic outsourcing experts.